Active Deposits or Funds: Funds used in the day to day business of the City and necessary to met current demands on the public funds.
Agencies: Federal agency securities.
Banker's Acceptance (BA); A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer.
Bid: The price offered for securities.
Broker: A broker brings buyers and sellers together for a commission paid by the initiator of the transaction or both sides; he does not position. In the money market, brokers are active in markets in which banks buy and sell money and in interdealer markets.
Certificate of Deposit ("CD"): A time deposit with a specific maturity evidenced by a certificate. Large denomination CDs are typically negotiable.
Collateral: Securities, evidence of deposit or other property that a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
Coupon: (a) The annual rate of interest a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date.
Credit Risk: Risk of loss associated with financial failure of a security issuer.
Dealer: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.
Delivery Versus Payment ("DVP"): Delivery versus payment is the delivery of securities with a contemporaneous exchange of money for the securities.
Diversification: Dividing investment funds among a variety of securities offering independent returns.
Duration: A measure of a bond's sensitivity to changes in market interest rates. On an individual security level, duration is defined as the percentage change in the price of a bond given a 1% change in interest rates. "Dollar duration" is the market value change in the position given the rate change.
Federal Credit Agencies: Agencies of the federal government set up to supply credit to various classes of institutions and individuals, e.g., S&Ls, students, farmers. They issue debt instruments that are not general obligations of the U.S Treasury, but are sponsored by the government and therefore have high safety ratings.
Federal Deposit Insurance Corporation ("FDIC"): A federal agency that insures deposits in financial institutions. As of July 12, 2010, the current standard maximum deposit insurance amount (SMDIA) was permanently raised to $250,000. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category.
Federal Farm Credit Bank ("FFCB"): The FFCB system provides credit services to farmers and farm-related enterprises. The FFCB sets rates and consolidates the financing activities of the intermediate banks throughout the 12 district system. FFCB issues short-term discount notes and fixed rate bonds. The bonds enjoy a secondary market even more active than the discount notes.
Federal Home Loan Banks ("FHLB"): The institutions that regulate and lend to savings and loan associations in a manner similar to the role Federal Reserve plays with commercial banks. It raises money by issuing notes, bonds and discount instruments.
Federal Home Loan Mortgage Corporation ("FHLMC"): A publicly chartered agency that buys qualifying residential mortgages from lenders, packages them into securities backed by the pooled mortgages and sells the securities on the open market. FHLMC or Freddie Mac also sells debentures. Freddie Mac was placed into the Conservatorship of the Federal Housing Finance Agency (FHFA) in September 2008.
Federal National Mortgage Association ("FNMA"): A publicly-owned, government sponsored corporation chartered in 1938 to purchase mortgages from lenders and resell them to investors. FNMA or Fannie Mae securities have traditionally been viewed as highly liquid and widely accepted. However, Fannie Mae was placed into the Conservatorship of the Federal Housing Finance Agency (FHFA) in September 2008.
Federal Reserve System: The central bank of the United States established by the Federal Reserve Act of 1913 to regulate the U.S. monetary and banking system. It (the Fed) is comprised of 12 regional Federal Reserve banks, their 24 branches and about 5,700 commercial banks that are members of the system. The system's main functions are to regulate the national money supply through the purchase and sale of securities, set reserve requirements for member banks, act as a clearing house for the transfer of funds throughout the banking system, and examine member banks to insure they meet various Federal Reserve regulations.
Government National Mortgage Association ("GNMA"): A government-owned corporation and agency of the U.S. Department of Housing and Urban Development. Mortgage-backed securities (called pass-throughs) are guaranteed by GNMA or Ginnie Mae, issued by private firms, and marketed by broker-dealers. Backed by full faith and credit of U.S. government.
Inactive Deposits or Funds: Funds other than interim deposits or active deposits.
Interest Rate Risk: The potential decline in value of a security or portfolio due to rising rates over time. (see Market Risk)
Interim Funds: Funds in excess of the aggregate amount of the inactive deposits and active deposits which although may not be needed for immediate use vill be needed before the end of the period of designation as such term is utilized in RC Chapter 135.
Liquidity: The ability to convert assets into cash or cash equivalents without significant loss.
Market Risk: The risk that an asset will decline in price, resulting in a financial loss to the holder when the asset is sold.
Market Value: The price at which a security is trading and could be purchased or sold.
Maturity: The date upon which the principal or stated value of an investment becomes due and payable.
Money Market: The market in which short-term debt instruments are issued and traded.
Portfolio: Collection of securities held by an investor.
Rating Agency: Rating service company that evaluates securities investment and credit risk; Fitch Investors Service, Moody's, Standard & Poor's Corp. Rating categories range from AAA (highest value) to D (questionable value).
Rating: A generic securities rating category of any nationally recognized rating agency without regard, in the case of a long-term rating category, to any refinement or gradation of such long-term rating category by a numerical modifier or otherwise.
Rate of Return: The yield obtainable on a security based on its purchase price or current market price; amortized to maturity or the current income return (the coupon rate divided by price.)
Repurchase Agreement: An agreement between a seller (dealer) and a buyer (City) of government securities, whereby the seller (dealer) agrees to repurchase the securities at an agreed upon price and at a stated time.
Safekeeping: Storage and protection of a customer's financial assets, provided as a service by an institution/bank serving as agent and, where control is delegated to the customer, also as custodian.
SEC Rule 15C3-1: (See Uniform Net Capital Rule)
Securities & Exchange Commission ("SEC"): Agency created by Congress to protect investors in securities transactions by administering securities legislation.
Student Loan Marketing Association (SLMA): Established by federal decree, a private corporation that purchases student loans from originating financial institutions and provides financing to state student loan agencies. SLMA or Sallie Mae issues short-term, medium-term and floating rate notes.
Time Deposit: Savings account or certificate of deposit held in a financial institution for a fixed term or with the understanding that the depositor can withdraw only by giving notice.
Treasuries: Securities issued by the U.S. Treasury.
Treasury Bills: Short-term securities with maturities of one year or less issued at a discount by the U.S. Treasury.
Treasury Bonds: Long-term, coupon-bearing debt instruments with maturities of 10 years or longer issued by the U.S. Treasury.
Treasury Notes: Intermediate, coupon-bearing securities with maturities of 1 to 10 years issued by the U.S. Treasury.
Treasury Obligations: U.S. government debt instruments (Treasury bonds, notes, bills) the government has pledged to repay. Called treasuries.
Uniform Net Capital Rule: SEC requirement that member firms as well as non-member broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1.
Yield: The annual rate of return on an investment, expressed as a percentage. That is: (1) Income yield, which is current dollar income divided by current market price of the security; or (2) Net yield or yield to maturity (YTM), which is current income minus any premium or plus any discount spread over the period from the date of purchase to the date of maturity of the security.
(Ord. 1776-10. Passed 9-23-10.)